Fonterra Maintains Payout Forecast as Drought Threatens Supply

Feb. 27 (Bloomberg) -- Fonterra Cooperative Group Ltd., the
world’s biggest dairy exporter, maintained its forecast payment
to farmers as New Zealand expects drought to spread across the
North Island, threatening to curb milk supply.

Fonterra expects to pay its 10,500 farmer shareholders
NZ$5.50 ($4.54) per kilogram of milk solids in the 2012-13
season, unchanged from a December forecast, the Auckland-based
company said in a statement. The company, which must review the
outlook every quarter, also maintained its earnings-per-share
forecast at 40 New Zealand cents to 50 New Zealand cents.

Drought was declared in Northland province today and
Waikato, the country’s biggest milk-producing region, is being
closely watched, Minister for Primary Industries Nathan Guy said
in a statement. Declarations in other regions are likely soon,
he said. Whole-milk powder prices are still 43 percent higher
than mid-July after the worst U.S. drought since the 1930s
boosted feed costs, prompting farmers to cull herds.

“We had a strong start to the season and milk collection
volumes were running 6 percent ahead of last season on a year-to-date basis,” Fonterra Chief Executive Officer Theo Spierings
said in the statement. “The dry conditions mean we are
currently forecasting total milk collection volumes to finish
approximately 1 percent ahead for the full season.”

The forecast payout could be adversely impacted by a
“further significant strengthening” of the New Zealand dollar,
Fonterra said today. The local currency has risen 2.1 percent
against the U.S. dollar in the last six months.

Fonterra also today announced a bonus share issue for
farmer shareholders and unit holders of 1 additional unit for
every 40 held on April 12, in a separate statement.